SoftBank in talks to make big investment in Paytm mall

By Vandita Jadeja | 2018-05-15

SoftBank is in discussions to invest more in the Paytm mall while it makes up its mind about selling the minority stake in Flipkart to Walmart. The Internet giant is in a clause with Flipkart that restricts SoftBank from investing more than $500 million in Paytm Mall until 2020. SoftBank had announced a $400 million investment in Paytm Mall for a 21% stake in April. Since then it has held talks to invest an additional $3 billion in the company.

Nothing is finalized yet and the transaction might not even go through. The talks with Paytm Mall will only go ahead if SoftBank finalizes its exit from Flipkart. SoftBank has not decided on selling the Flipkart shares due to the tax implications and it also expects an increase in the valuation of Flipkart. In August 2017, SoftBank Vision Fund invested about $2.5 billion in Flipkart while it was trying to orchestrate a merger with Snapdeal, which was a first bet in the online retail space in 2014.

SoftBank has invested about $900 million in Snapdeal until now in the hope that the etailer will be able to challenge the market leadership of Flipkart. Unfortunately, the company has slipped to a third behind Amazon India by 2016. If SoftBank sells its entire share in Flipkart to Walmart, it will pocket about $4 billion for 21% stake. Walmart is buying 77% stake in Flipkart for $16 billion.

Paytm Mall is an online marketplace that also counts Chinese giant Alibaba Group and venture capital firm SAIF Partners as its two shareholders. Alibaba Group has 46% shareholding and SAIF Partners has 20% shareholding. Paytm Mall is valued at $1.9 billion, thus, a unicorn. Currently the Indian market is witnessing a three way battle that includes Amazon, Walmart and Alibaba. If SoftBank exits Flipkart and invests into Paytm Mall, Tencent will remain the largest minority shareholder in Flipkart after the Walmart deal. Paytm Mall held 5.6% share in the market in 2017 with gross sales of $1 billion. As against it, Flipkart held a combined market share with Myntra and Jabong of 39.1% and Amazon India held 31.1%.

Alibaba has invested in logistics player XpressBess and BigBasket to help the expansion of the Paytm Mall. All the three companies are working closely with one another. With a focus on online to offline model, Paytm Mall drives 60% of the total sales through partnerships with 75,000 stores and it plans to triple the online presence by 2019. It has made its presence felt in the Indian e-commerce market by replacing Snapdeal as the third largest player after Flipkart and Amazon India. The company reported an annual GMV of $3 billion and is now targeting a $10 billion GMV by the end of this fiscal year.